Purchased a building for 570000 You got a mortgage of 440000

Purchased a building for $570,000. You got a mortgage of $440,000 at 7% with monthly payments based on 30 year amoritization. Loan term is 14. The bank charges 2 points. What is the first year\'s interest deduction?

Then,You purchase a camp for $550,000 on May 15 so you can use and rent to customers. The land its on is worth 29% of the purchase price. You build a pavilion right away for $22,000. You hold the property for 5 years and sell it for $730,000. What is your accumulated depreciation over the 5-year holding period?

The answers are provided. Show the work / calaculations used to come up with BOTH of the highlighted answers.

1st Year Interest Deduction Purchase Price Mortgage Price-Mort Mort. Rate % Mort. Rate $ Amort. Pd $ 570,000 $ 440,000 $130,000 7% or monthly $30,800 or monthly 30 years 360 months or Points Charged or 0.02 Loan Term 14 years Deduction $30,658.41 Accum. Depreciation over holding period Purchase Price Land worth % Land Worth $ Price-Land Improvement Price-Land+lmprov. 412,500 Holding Pod $550,000 29.00% $ 159,500 $390,500 S22,000 S years 60 months or New Selling Price 730,000 Accum. Depr S 74,841

Solution

1. Computation of 1st year interest deduction:
Given:

Loan Amount

$     440,000

Annual Interest Rate

7.00%

Amortization period in years

30 years

monthly rate= 7%/12 = 0.58%
N =30*12 = 360

Thus, monthly payment:
EMI = [P * R * (1+R)^N]/[(1+R)^N-1]
= (440,000*0.583%)* (1+0.583%)³⁶⁰ / {(1+0.583%)³⁶⁰-1}
= 2,565 *8.1068 / 8.1068-1
= $2,927.33

Month

Payment

Interest = ending balance* rate /12 months

Principal = monthly payment - interest

Balance= beginning balance - principal payment

$440,000.00

1

2,927.33

440,000*7%/ 12 = 2,566.67

2.927.33-2,566.67 = 360.66

440,000-360.66= 439,639.34

2

2,927.33

439,639*7%/12= 2,564.56

362.77

439,276.57

3

2,927.33

2,562.45

364.88

438,911.68

4

2,927.33

2,560.32

367.01

438,544.67

5

2,927.33

2,558.18

369.15

438,175.52

6

2,927.33

2,556.02

371.31

437,804.21

7

2,927.33

2,553.86

373.47

437,430.74

8

2,927.33

2,551.68

375.65

437,055.08

9

2,927.33

2,549.49

377.84

436,677.24

10

2,927.33

2,547.28

380.05

436,297.19

11

2,927.33

2,545.07

382.26

435,914.93

12

2,927.33

2,542.84

384.49

435,530.44

Total interest

$30,658.41

Loan Amount	$     440,000
Annual Interest Rate	7.00%
Amortization period in years	30 years